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The Cable Bill's Too High. Here's Why

The cable bill is too damn high, as just about every U.S. cable subscriber will attest. This is a truth even industry analysts and cable executives can no longer deny, though they haven’t yet agreed on whom to blame.

A little over two years ago, Sanford Bernstein analyst Craig Moffett was warning about “the widening disconnect between flat-to-declining consumer disposable income, particularly in the bottom two quintiles of household income, and the rising price of media and telecommunications services.”

And so in 2011, Comcast’s (Nasdaq: CMCSA) average monthly revenue per video customer increased by $10 for the second year in a row, while the cable giant’s stock rose

More video, way more profit (Photo: Wikipedia)

8% and yielded an additional 2% in dividends.

And at that year’s end, Liberty Media (Nasdaq: LMCAD) Chief Executive Greg Maffei was asking about “what happens to the bundle of cable if you keep pushing [the price] higher and higher,” while decrying rate increases for ESPN as “a tax on every American household.”

And so in 2012 Comcast shares rose 58%, while those of ESPN owner Walt Disney (DIS) jumped 33%. Cable networks led by ESPN earned $5.7 billion for Disney in fiscal 2012, a 9% increase on the prior year.

No wonder just the television portion of the cable bill has nearly doubled to $78 monthly over the last decade. And no surprise that U.S. cable and broadband rates are now at nosebleed levels relative to those on offer in foreign capitals, despite delivering inferior technology to the one that lets Koreans, Scandinavians and Hong Kongers surf the Internet much faster.

Is it because our sports are so much more exciting, our comedies that much funnier or our news shows more informative? If only. It’s because our cable markets are entirely uncompetitive on price, even in places where cable providers have let the satellite dish make significant inroads.

And why are they uncompetitive on price? That’s no mystery at all. It’s because government has failed to foster the sort of competition that’s held down prices around the world.

That’s the point Rick Karr made after researching the regulatory regimes in the UK and the Netherlands. It’s the point Pulitzer Prize winner David Cay Johnston makes in his new book.

And it’s the point law professor Susan P. Crawford argues in her new book as well. But whereas Karr and Johnston are mere journalists, Crawford is a former White House aide aiming against all odds to change the regulatory philosophy. So an industry minion was dispatched to enumerate all the reasons it shouldn’t be regulated as a public utility. The Wall Street Journal subcontracted its hit to an American Enterprise Institute fellow who reproached Crawford for “passionate activism” and lectured her on the distinction between monopoly and oligopoly.

But nitpick as industry defenders might, there’s no getting around the fact that the market deck is stacked in favor of the corporate owners of the cable pipes, with consumers stuck paying an unjustifiably high price for subpar services.

In the last decade, the Federal Communication Commission has gradually abdicated regulatory oversight of the cable industry, a shift begun under the leadership of an FCC chairman who now works as cable’s top lobbyist. Done are efforts to force broadband owners to lease capacity to competitors, the practice that’s largely responsible for the lower prices seen abroad. And gone is all determination to limit the market power of media giants determined to both make and distribute content. One of the FCC commissioners who approved Comcast’s takeover of Universal soon left to lobby for Comcast.

The resulting system is one in which every ridiculous sports contract and every hike in ESPN fees gets passed down to the lovers of antique shows and nature documentaries entirely uninterested in sports. It’s a system that has consumers pony up for the broadcasts they used to receive for free, since local retransmission fees are the industry’s fastest growing cost. And it’s a system in which small, fledgling channels will be increasingly frozen out unless they’re subsidiaries of Mega Media, Inc.

In other words, the big will get bigger and charge more for their expensively procured spectacles.

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The dirty little secret, of course, is that much of this content (sports, movies, etc.) is available for free online. Buy a cheap desktop, hook it up to your TV, and simply stream the content you want to watch. This little trick saves me about $800/yr.

Yea, but cable companies control the internet, until internet companies come out as stand alone complexes, they still have control. Don’t think they wont jack up your internet bill, or put in tier payment systems, just watch.

Soon the game will change again. You can arrange for a WiFi hot spot through numerous sources now. Within two years cable companies will be hurting. Some cities are offering free wireless. The cable companies greed will come back to haunt them.

Thanks for reading. I realize people use Starbucks for their office, but going out to access the Internet doesn’t scream 21st century to me. I also expect wireless providers to protect profit margins and their cable marketing partners in pricing their WiFi offerings.

You’re right. At least for the next immediate stage. But cut rate WiFi is just around the corner. In one city I visit you don’t even need internet service in certain areas because the city provides city wide WiFi. In my opinion there that trend will only grow.

I can do without cable and I wonder how many companies will get into a gut wrenching battle which will see ever reduced products for the public. At some point the cable companies will go down.

What I find even more infuriating is when municipalities jump in and help these companies create a monopoly. In Oakland, CA for example, the city has helped keep other high speed providers out in obedience to Comcast. Comcast has us in a stranglehold, with crazy price schemes and tiers. They aren’t even trying to be competitive – why should they? The alternative is DSL, which while reliable is much slower. Verizon FIOS has been kept out of the City, which I am sure Comcast is happy about.

I remember when Cable started – they promised that they would be making their revenue from subscriber fees only, it was supposed to be commercial free – but the government did not make them keep that promise. Now we are paying nosebleed prices for service, while they also make money with advertisement. We are paying more for less. The speeds we are getting are artificial – it isn’t that higher speeds are not capable, it’s because the cable companies are holding the higher speeds hostage so they can offer us more speed for more money over increments of time. They actually spend money on technology that slows the internet speeds down – it would be cheaper to let it run at it’s natural rate – but why do that when they can offer you “higher speed internet” for just a little bit more at a time?

I recall for a long time thinking that $50.00 per month was as far as I would go for internet / tv service – but that’s not an option now. I don’t know what world these people live in – but my pay hasn’t changed since 2004 (well it has – I take home LESS now); they act as though every year people are getting paid more and more, and that’s just not the case.

If you couple this with the same attitude from landlords, utility companies, government agencies (dmv, parking, etc). entertainment venues, restaurants, grocers, retailers, creditors – it’s looking like something has got to give here, we are being squeezed like olives in a press for every penny they can get… I don’t know about you but I am out of oil…

“The big squeeze.” It seems like it has been one scam after another. First the gas prices, then the ponzi schemes, following housing markets, etc. Hopefully we can move forward, and the economist show promise.